This estimate is higher than the Reserve Bank of India’s (RBI) forecast of 7.2 per cent.

The ongoing growth momentum led by government capital expenditure (capex), deleveraged balance sheets of corporations and banks, and incipient private corporate capex cycle has now found support from the union government budget, Ind-Ra noted in a release.

The budget promises to bolster agricultural and rural spending, improve credit delivery to micro, small and medium enterprises (MSMEs) and incentivise employment creation in the economy.

Ind-Ra believes these measures would help in broad basing the consumption demand, which if not addressed, can constrain the ongoing growth momentum.

The rating and research agency expects private final consumption expenditure (PFCE) to grow by 7.4 per cent year on year (YoY) in FY25 (it was 4 per cent in FY24)—a three-year high.

The consumption demand is highly skewed, as it is driven by the goods and services largely consumed by the households belonging to the upper income bracket.

However, an above-normal monsoon coupled with the measures announced in the union budget FY25 is expected to correct it, by boosting the demand of goods and services consumed by the rural and households belonging to the lower income bracket.

Food inflation continues to be a risk, while the expectation of retail inflation in FY25 averaging lower than in FY24 will support the real wage growth, Ind-Ra said.

Ind-Ra expects the average retail and wholesale inflation to come in at 4.5 per cent and 3.2 per cent respectively in FY25.

A revival in the private sector capex may reduce the capex spending of the union government, but that is still some distance away.

Heightened capex activity has been observed in the textile sector.

Ind-Ra expects goods and services exports to grow by 6.6 per cent YoY and imports to grow by 8.8 per cent YoY in FY25 as against 2.6 per cent YoY and 10.9 per cent YoY respectively in FY24.

Though global trade is showing signs of gathering momentum in the first quarter of FY25, increased global supply concentration, trade fragmentation and protectionism pose significant risk to India’s exports, it added.

Fibre2Fashion News Desk (DS)